How To Price Banner Display Advertising

by jim on December 30th, 2009

One of the hardest things to do as a blogger is quote a value for your site’s real estate. One day an advertiser is going to reach out to you and ask to buy some banner advertising on your site (chances are you’ve fielding about a million text link buying requests already!) and you’ll be tempted just to throw out a number.

Avoid the temptation!

If you give too high a number, it may scare off the advertiser (probably not). If you give too low a number, you’ll be lowballing yourself! The best way to price out display advertising placements is to find out how much they are actually worth to you. Here’s how you figure that out.

Select Your Placements

You can pick placements randomly or you can use a data driven CTR-based approach to selecting ad placements, but you will need to pick out a few places on your site that you would consider selling advertising space.

Skycrapers (120×600 & 160×600), headers (468×68), and 125×125 buttons are probably the most popular sizes (of the Interactive Advertising Bureau’s standard ad units) so if you pick out spots just for those sizes, you’ll be set.

Use Google Adsense Blocks

Grab an Adsense block and stick it in the spot to see how it performs. The metric you want to look at is eCPM because it’s the closest analogy to a display ad you can get. The eCPM of an Adsense block will be calculated based on clicks, it gives you an idea of what that placement is worth to you.

You can use that eCPM and your traffic figures to calculate a base monthly rate to start with.

If you already have placements with Adsense, you can simply look at historical data.

Make Adjustments

With that as your starting point, you can begin to make adjustments. Here are some important thoughts to keep in mind:

  • Traffic growth: If you’re a growing site and the buyer wants terms of longer than a quarter, you’ll want to factor in growth. You don’t want to sign a six month deal only to double your traffic and be giving a huge discount in the fifth and sixth months.
  • Negotiation buffer: Add in a little more with the expectation that the buyer will want to negotiate you down. Whether this is 100% more or 50% or 20% is up to you, but definitely build this into the number you return.
  • Lack of optimization: If you haven’t split tested Adsense palettes, there’s a strong chance you aren’t optimized. In that case, add a small premium to your quote to account for the fact that you haven’t squeezed all you can out of Adsense.
  • “Handling” fees: This advertising relationship is going to require a bit more work than Adsense, which is a set it and forget it type of ad. You will be spending time negotiating, re-negotiating, sending invoices, etc. Factor all that effort in.
  • Collection fees: If they are paying by PayPal, add in the fees for processing. If they are writing a check, consider the cost of depositing it.
  • Collection risk: If it’s a well known company or if they pay up front, this is less of a risk. If you think they might be a hassle to deal with, build a buffer into that cost.

This may not be the ideal way to price your placements (that would be if you had an auction) but it’s better than guessing, right?

Do you have a way to price your placements? Or things you consider that I missed?

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6 Responses to “How To Price Banner Display Advertising”

  1. Patrick Says:

    I’ve used the AdSense replacement model for quoting prices for the skyscraper position above the fold. Other spots above the fold receive a similar premium.

    Another factor to consider is how much the branding would be worth to the advertiser. For example, if your site is a premier site in your niche and the company is making a large advertising push, then consider bumping your rates. Best in class blogs and websites carry a lot of weight and demand a premium, especially for premium ad slots.

  2. jim Says:

    Yes I agree, you should definitely try to understand the company’s motivation. Oftentimes it’s not a pure CPA type of play, it’s more branding than anything.

  3. » Don’t Optimize Google Adsense eCPM Says:

    […] eCPM does have value, it tells you how much that placement is worth to you as a publisher. If a company wants to buy the placement for a month, you have a good idea of how […]

  4. Lazy Man and Money Says:

    Hmm, I find that 728×90 and 300×250 (or 250×250) my most popular ad sizes. I almost never have anyone request 125×125 or 486×68, even though I realize that a lot of sites support them.

  5. jim Says:

    The problem is that it’s hard to find those placements on most blogs, so even if people want them it’s hard to oblige.

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